Operations Management

REPORT
Strategic Operations Management

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 Operations Management

Executive summary
Strategic operations are the strategies that a firm puts in place to ensure that the set goals and objectives

are achieved. The essay has discussed process types and specifically manufacturing process types and

service process types. Manufacturing process types includes, project, jobbing, batch, mass and continuous

process. Service process types include professional service, service process and mass service. The essay

has discussed in details economic order quantity, advantages and disadvantages of economic order

quantity and limitations of implementing it. The essay has also discussed total quality management and

importance of total quality management.

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 Table of Contents
Executive summary......................................................................................................................................ii
Introduction.................................................................................................................................................1
Process Layout.............................................................................................................................................2
Fixed position layout;..............................................................................................................................2

Functional layout;....................................................................................................................................2

Product layout;........................................................................................................................................3

Cell layout:...............................................................................................................................................3

Service process types...............................................................................................................................4

Manufacturing process types and waste problem solving.......................................................................4

Using the theory on process types discuss with 1 example of each how consideration of .........................4
Project Processes.....................................................................................................................................4

Jobbing Processes....................................................................................................................................5

Batch Processes.......................................................................................................................................5

Mass process...........................................................................................................................................6

Continuous Processes..............................................................................................................................6

Explanation of the Economic order quantity...............................................................................................6

Advantages and disadvantages of economic order quantity.......................................................................9
Advantages of the economic order quantity...........................................................................................9

Disadvantages of economic order quantity...........................................................................................10

Limitation of implementing economic order quantity in waste management..........................................10

Total Quality Management (TQM)............................................................................................................11
Relating Total Quality Management to the manufacturing process and the operations.......................11

Relating Total Quality Management in economic order quantity and inventory management............12

Rapid adjustment and effective reconciliation of inventory..............................................................12

Accurate inventory information-.......................................................................................................12

Prevents mistakes from occurring.....................................................................................................12

Conclusion.................................................................................................................................................13
References.................................................................................................................................................14

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List of Figure

Figure 1: Process Layout (Source- author)..................................................................................................2

Figure 2 Process types (Source- author)......................................................................................................3

Figure 3: EOQ formula (Source- author).....................................................................................................8

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Introduction
Strategic operations management is a branch of management that refers to the administration of

business practices that create the highest efficiency in a company (Kaplan and Norton, 2008).

Strategy formulation and implementation of strategies are the initiatives that are taken on behalf

of shareholders by the management of a company. Organisations are supposed to ensure that

they have put in place strategies and measures that will ensure they operate effectively and

efficiently (Basu et al., 2009). This section is going to discuss manufacturing process type,

economic order quantity and total quality management based on Guy’s and St. Thomas Hospital.

Guy’s and St. Thomas Hospital is one of the largest hospital that offer quality services and aims

to improve the quality of health care services.

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 Operations Management

Process Layout
This refers to the grouping of similar equipments and resources in the same facility according to

the functions or roles that they are to execute (Metters t al., 2013). There are four different types

of process layouts and they include the fixed-position layout, functional layout, cell layout and

the product layout. They are defined below;

Figure 1: Process Layout (Source- author)

Functional Cell
layout layout

Process

Layout

Fixed Product
position layout
layout

Fixed position layout; this is a type of layout that is applied in a project whereby the final

product produced is too fragile or heavy to be moved around (Newman, 2011).. Royal Brompton

Hospital is an example of a hospital that falls in this category as all its heart surgery operation is

done in the same premise until the patient is released (Chard et al., 2011).

Functional layout; in this type of layout, similar resources are grouped in the same department

or unit and used to achieve a common purpose (Dotchin and Oakland, 2014). Royal London

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hospital falls in this category as it divided into different sections that are responsible for a unique

service for all users to be satisfied at the end (Barro et al., 2006).

Product layout; this is a layout that is designed for the production of a specified product (Kumar

and Tsiros, 2009). Princess of Wales Hospital falls in this category as its specialised in the

manufacture of medicine, hence, has grouped its activities and machines in different department

according to the medicine to be produced (Department of Health, 2002).

Cell layout: this is a layout that involves the grouping of machines that produce similar or related

products in one unit (Lasrado, 2014). In this case, the Kingston Hospital falls in this category as

all it maternity equipments are kept in the same unit to offer services related to child birth

(Boyle, 2011).

Evaluating the operation and process layout at Guy’s and St. Thomas Hospital and identifying
wastage

Figure 2 Process types (Source- author)

Process Types

Manufacture Process Service process

Project Process Professional service

Process
Jobbing Process
Service Shop Process

Batch Process
Mass Service Process
Mass Process

Continuous
Process

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There are two types of process types, which include manufacturing and service process types

(Hadfield, 2006). Manufacturing process types includes, project, jobbing, batch, mass and

continuous process. Project process is one off, complex and large scale and high content work.

Jobbing process is also called one off production. Batch process is another process of

manufacturing that includes the execution of a series of jobs on a computer. Continuous process

is a streamlined process that involves ongoing production of products. Mass line process is the

production of large volumes or quantities of custom made products.

Service process types

Service process types include professional service, service process and mass service. In

professional service, clients spend considerable time in service process, additionally there are

high levels of customization with service processes (Kaplan and Norton, 2009). Service shops

are medium volume levels of customers and mass services are high volume levels of customers.

Manufacturing process types and waste problem solving

Using the theory on process types discuss with 1 example of each how consideration of each
may help with the issue of wastage

Project Processes
Project process is one off, complex and large scale and high content work products. Project

process can also be defined as the process of planning, initiating, executing, controlling and

closing of work (Antonsen, 2010). An example of the project process is the aim to increase the

number of beds to accommodate more users. For example, the need for Guys and St. Thomas to

increase the number of its beds is a problem that fall under the project processes.

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Project process will ensure that the project activities are done in phases and each phase is

completed before another starts. Through it, the acquisition costs of additional beds are

minimised and that the project is completed on time. As a result, the project resources are

directed towards the project and are not shared with other projects.

Jobbing Processes
Jobbing process is one off production that is involved in the production of customer made

products (Kenerly and Neely, 2002). The process requires a skilled team to complete the whole

product and everyone is customized. In jobbing process there are high variety and low repetition.

For example, a problem for Guy’s and St. Thomas Hospital, which falls under Jobbing Process,

is the supply of enough water that will cater for cleaning, cooking and drinking with the

institution. The hospital can minimise waste of water through Jobbing processes as it will ensure

that water is well utilised by all members of the hospital, both users and workers. Also, meters

will be installed in each department so that water consumption is monitored.

Batch Processes
Batch process is a technique that is used in manufacturing where products or objects are created

in stages over a series of work stations or in stages (Ahuja and Riita, 2011). It can also be

defined as the execution of a series of jobs on a computer using a computer program. For

example, a problem at Guy’s and St. Thomas Hospital, which falls under batch process, is the

high number of defective wheel chairs. This exposes users to risk of further harm or injury, if in

the case they are offered such wheelchairs to use. Through the batch process, the hospital will

ensure all its wheelchairs are defect-less, which this will be very significant to users as the risk of

further injuries will be minimised.

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 Operations Management

Mass process
Mass process is the production of products in large quantities and production of products that are

similar. It is able to produce products of higher volumes than batch process. Low or narrow skills

are required in mass process (Antonsen, 2010). For example, Guy’s and St. Thomas incur huge

costs in preparing food that fits into each and every individual taste and preferences. This is

because the cost of producing single items of food rather than mass production of food is high.

Mass line process will help reduce wastage in the hospital by ensuring that food for patients is

produced in large quantities. Producing food in large quantities will reduce the cost of production

per unit and help the hospital save on costs and reduce food wastage. Also, some users need halal

or kosher food but they are not offered this. Thus, they do not finish the food they are offered

and this results in wastage.

Continuous Processes
Continuous process is the streamlined and ongoing production of products and services. It is

characterised by extremely high volume and low variety and the process is capital intensive and

automated (Ardchivilli et al., 2003). It is difficult and expensive to start a continuous process and

to start and stop the process. For example, a problem at Guy’s and St. Thomas may be that users

are offered drugs that have expired or nearing the expiry date. This can be minimised by the

continuous process as the management of the hospital will keep on checking the medicine to

ensure only correct medicines are administered and those that have not expired.

Explanation of the Economic order quantity

Economic order quantity can be defined as the number of units a firm should add to the

inventory with each order in order to minimise the total costs of inventory. The costs of holding

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inventory include holding costs, shortage costs and ordering costs. Holding costs is also called

carrying costs and it is the sum of money tied up in the inventory. An example of this cost

includes cost of capital or opportunity costs (Burke et al., 2009). Economic order quantity will

reduce wastage at the hospital by ensuring that the hospital orders products that it requires and

that are appropriate. This will save the hospital on costs and ensure that resources are used

appropriately. The other costs include costs of the physical space occupied by the inventory

bought by Guy’s and St. Thomas Hospital like rent, depreciation cost. These are the costs the

hospital incurs when medical equipment have depreciated in value and insurance costs are the

costs that are incurred to insure Guy’s and St. Thomas Hospital inventories (Jortberg et al.,

2012). Ordering costs are the costs of making orders, which includes the costs of or the expenses

that are incurred when creating and processing an order and the costs of purchase requisition.

Shortage costs are the costs that an organisation incurs when they do not have the inventory that

is required by customers and patients.

The hospital has a manufacturing process of ordering of inventory and mostly, orders are made

in batches. However, the hospital sometimes orders for inventory for example, drugs in large

quantities than it requires and ends up incurring costs and some drugs expiring. Sometimes the

hospital orders a few drugs and ends up putting the life of patients at a risk when they are out of

stock (Collins et al., 2010). Economic order quantity can be used by organisations such as Guy’s

and St. Thomas Hospital as part of the company inventory system. The economic order model

assumes that demand is constant and that inventory or stock is depleted at a fixed rate until it

reaches zero. When inventory reaches zero, orders on specific items are made to return inventory

to the required levels. The model also assumes that replenishments are made spontaneously and

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that there are no inventory shortages. The formula of calculating economic order quantity is

shown below:

Figure 3: EOQ formula (Source- author)

Economic Order Quantity

EOQ =
Where:

C0 = Order costs

D = Demand

Ch = Holding Costs

Assuming demand is the hospital beds, holding costs that the hospital will incur will be the cost

of holding one unit of bed for a period of time. Ordering costs are the costs that the hospital will

incur ordering more beds when the number of patients increases. If the demand for hospital beds

are 5,400, the cost of ordering is £100 and the holding cost is £29 then the EOQ using the above

formula will be 193.

Co=100

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 Operations Management

D= 5400

Ch=29

First step

2*Co*D= 2*100*5400= 1,080,000

Second step

1,080,000/29= 37241.379

Third step

Square root of the answer 37241.379

Gives 193

Advantages and disadvantages of economic order quantity

Advantages of the economic order quantity

Economic order quantity is important because it reduces chances of stock outs (David and Neil,

2013). It ensures that inventory is managed effectively and that the minimum inventory level is

monitored. Inventory management will ensure Guy’s and St. Thomas Hospital is able to monitor

its inventory and ensure that there are no inventory stock out for essential medicines which can

put the lives of patients at risks. Economic order quantity will reduce the costs of inventory

management. The costs of inventory include holding costs, shortage costs and ordering costs.

Ordering costs are the costs of making orders, which includes the costs of or the expenses that

are incurred when creating and processing an order and the costs of purchase requisition (Collins

et al., 2010). Shortage costs are the costs that an organisation incurs when they do not have the

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inventory that is required by customers and patients. Economic order quantity will create better

inventory planning and ordering as well as reduce overstock hazards- Effective inventory

management system enables organisations to plan inventory and ensure that the overall costs of

ordering are reduced. It is important to bear in mind that holding too much stock can affect the

performance of the company. Effective inventory management will enable the management of

Guy’s and St. Thomas Hospital to plan inventory effectively.

Disadvantages of economic order quantity

The disadvantage of economic order quantity is that the model assumes that the demand of

inventory is constant and that inventory that is held by hospital is depleted on a fixed rate, which

is not the case (Burke et al., 2009). We all know that demand of inventory fluctuates and is not

constant. This will be a disadvantage to Guy’s and St. Thomas Hospital because inventory

cannot be depleted on a fixed rate. The economic order model is based on the assumptions that

the fixed costs of holding stock are constant. For example, the higher the number of beds the

hospital demands, the higher the holding cost the hospital will incur. The other disadvantage of

the model is that the model assumes that material usage is predictable and is evenly distributed.

Guy’s and St. Thomas Hospital cannot predict the inventory usage because demand varies. The

economic order model cannot be applied in perishable inventories for example food that the

hospital prepares for patients (Katon, 2012).

Limitation of implementing economic order quantity in waste management

Limitation of implementing the economic order quantity model is that implementing the model is

costly and calculations are time consuming (Blundell-Wignall et al., 2008). The assumptions that

the model makes, affects the reliability of the model, because results cannot be relied upon. The

model cannot be used to reduce wastage because of the assumptions, and this makes it

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unreliable. The assumption that demand is constant is untrue for example, demand for hospital

drugs cannot be constant because the number of patients and demand varies. The model also

assumes that storage space is limited which is not the case. Guy’s and St. Thomas Hospital

storage space for example, is not limited and this makes implementation of the model a

challenge. The model is limited because it assumes that demand is constant and inventory is

depleted at certain fixed rates. This limits its implementation because inventory cannot be

depleted at fixed rates.

Total Quality Management (TQM)

Total quality management is a method where management and employees become more

involved in the continuous management of a company and the production of goods (Blundell-

Wignall et al., 2008). TQM is very important because it is able to integrate all the functions of a

company and work towards achieving the set goals and objectives.

Relating Total Quality Management to the manufacturing process and the operations of the
hospital
TQM is able to integrate all the functions of the hospital and ensure that the hospital is

performing towards the attainment of the set goals and objectives (Basuony, 2014). TQM will be

discussed in relation to batch process and ordering of inventory at the hospital as well as process

of patient data in batches. It is able to identify and reduce mistakes that occur in the process and

operations of the Guy’s and St. Thomas Hospital. TQM is able to prevent mistakes early and

prevent them from being passed through the supply chain and the value adding activities. TQM

will ensure that the hospital drugs are manufactured in batches. This will save the hospital costs

and improve efficiency. For example, it will ensure that the production process is effective so

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that the targeted quantity of drugs is manufactured on time to meet the needs of users of health

and social care services.

Relating Total Quality Management in economic order quantity and inventory management.

Rapid adjustment and effective reconciliation of inventory –TQM is used by organisations to study

the flexibility of inventory and procedures to identify factors that limit stock adjustments (Ahuja

and Riita, 2011). It ensures that stocks are updated on time and adjustments are made once

movement of inventory takes place. It will ensure that stock is updated in batches and orders are

made in batches. Reconciling stock manually is quite expensive and time consuming. TQM

management can be used to reconcile stock and ensure that records of stock that are held by

hospital are accurate and relate to the period under study. Inventory reconciliation will ensure

that inventory of Guy’s and St. Thomas Hospital conform with the records and they are accurate

and there are no errors or very few errors. It is able to focus on errors and identify the cause of

errors in inventory and put in place measures that reduce the errors in future (martin et al., 2005).

Accurate inventory information- Applying total quality management in inventory management

ensures that the information of inventory of the Hospital is accurate (Mercury et al., 2007). The

use of TQM is able to track requisition and ensure that orders are filled accurately. TQM is also

to identify were orders are filled inaccurately. For example, it will ensure that the project of

increasing the number of beds to serve the rising number of users is done effectively and

efficiently to minimise costs that arise from wastage or misappropriation of the resources used

for ordering and purchasing the beds.

Prevents mistakes from occurring – Effective inventory management is very important to Guy’s

and St. Thomas Hospital because it is able to prevent mistakes from occurring, which ensures the

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final end product is of high quality and meets the needs of customers (Ardchivilli et al., 2003).

TQM is able to identify and detect mistakes early and prevent the mistake from being passed

down the supply chain. It ensures that where mistakes occur products are stopped till the process

is corrected, which prevents the production of defective products or the production of more

defects. Examples of mistakes include entering the wrong information and data which may

overstate and understate inventory when recording transactions as a batch.

Applying TQM in Guy’s and St. Thomas Hospital will prevent the company from preventing

mistakes that occur during operations in the company. The management of inventory is able to

impact on the performance of the hospital. It is able to reduce inventory costs throughout the

production and operations of the hospital. This is by ensuring that the hospital orders for

inventory that it requires and inventory is ordered when it reaches the reorder level.

Conclusion
The essay has defined process types, which includes manufacturing and service process types.

The essay has discussed the meaning or economic order quantity, the role of the model at Guy’s

and St. Thomas Hospital and the application of the model in the process of minimising wastage.

The essay has discussed the importance of total quality management and its relationship with

inventory management.

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